I loved going to bookstores with my dad. We often found ourselves in the mall waiting for my sisters and mom to finish shopping. B. Dalton bookseller displayed rows of books we could browse. The covers exploded with action and color, at least in the science fiction section, where I would squat down on the floor with the laser beams and rocket ships.
We only bought books from B.Dalton, unless we checked them out from the library. Those were our options. Oh – but now, there is a plethora of choices, not only where you buy books but also in the formats available; ebooks and audiobooks weren’t commonly available.
Amazon’s disruption of booksellers also changed how authors are paid. The supply chain that provided books to B. Dalton provided authors with a standard percentage of sales; there was little fluctuation. Today, the route from author to buyer is legion, and each come with differing payment levels to authors.
You may not know it yet, but where you buy a book makes a difference to your favorite authors.
Royalties by Channel
Royalties are paid to authors for each book sale. Understanding royalty calculations requires understanding channels. Defined in simple terms, channels sell books. For example, Amazon is a channel. Audible is a channel (for audiobooks). Even libraries are a channel.
Each channel has pros and cons. Some (Amazon) have greater reach and sell more books. Others pay better royalties. You, dear reader, are typically not concerned with author royalties. Your goal is to get the book in the format you want with the least hassle. That’s what makes Amazon + Kindle + Audible so successful. They offer all formats in an easy-to-buy package.
Here’s a table showing the best-paying channels for My Favorite Mother-In-Law. I make the most money per sale when readers purchase through these channels. But they aren’t the most convenient and you probably haven’t even heard of them before now.
| Channel | eBook | Audiobook | |
|---|---|---|---|
| Suggested Retail $ | $9.95 | $9.95 | $4.99 |
| Spotify | $4.99 | ||
| Ingram Spark Direct | $5.47 | ||
| Smashword Direct | $8.45 |
Compare the royalties above with the royalties below. In particular, notice the royalties paid by Amazon (Audible + Amazon + Kindle) vs Spotify + Ingram + Smashwords:
| Channel | eBook | Audiobook | |
|---|---|---|---|
| Suggested Retail $ | $9.95 | $9.95 | $4.99 |
| Amazon (includes Kindle and Audible) | $6.92 | $3.67 | $0.99 |
| Findaway Voices When distributing to retail (24symbols, Anyplay, Apple, Audiobooks.com, AudiobooksNow, Beek, Bokus Play, Bookmate, Books-A-Million, Chirp, Downpour, Everand, Google Play, Instaread, Kobo, Walmart, Libro.FM, Milkbox, My Audiobook Library, Nextory, Nook, Radish, Storytel, TuneIn, Ubook) | $3.99 | ||
| Findaway Voices When distributing to libraries (Axiell, Baker & Taylor, Bibliotheca, Follet, Hoopla, MLOL, Odilo, Overdrive, Ulverscroft, Wheelers, 3Leaf Group) | depends on the business model used by the library | ||
| Google Play eBook and Audiobook | $6.96 | $3.49 | |
| Your Library | $4.47 | ? | $4.49 |
| Smashwords Distributed eBooks (Barnes & Noble, Kobo, Apple, Library Direct, Baker & Taylor, Overdrive, Everand, 3m cloudLibrary, Gardners, Odilio) | $4.47 or $5.97 |
Suggested Retail Price is Just a Suggestion
Publishers pay royalties as a percentage of the Suggested Retail Price (SRP). So, you might ask, why didn’t I just list the percentage instead of the actual price? That’s a good question, but it misses one sticky issue. Channels don’t always charge the full SRP. Channels have different business models (A la carte1, credit-based subscription2, pool subscription3, combined portions4, and cost per checkout5). Sometimes channels change the price depending on the weather or the phase of the moon or some obscure internal algorithm. Then they pay royalties based on this new price.
For example, Audible (owned by Amazon) will let you listen to My Favorite Mother-In-Law for free if you are a member of their club. Or you can pay $6.95. But hey – the SRP is $9.99. So Audible plays around with the price and I actually only get paid about $0.99 per listen. That’s what my year-end 1099-misc tells me, despite what Audible might say.
Channels justify fluid pricing by asserting that lower prices mean higher sales and eventually more profits for the author. Or it might just mean the channel is trying to build market awareness by offering my talents at a lower price than a competitor. Either way, I can either agree, or I can leave. They do not negotiate royalties, at least not with a small-time author such as myself.
Distributors vs Channels
Notice there are only a few actual distributors:
- Amazon and friends (print + ebook + audio)
- Ingram (print)
- Findaway Voices (audio)
- and Smashwords (ebook)
Any other channel buys from one of the above distributors.
So…for maximum sales opportunities, I need to submit my book to each of those channels. To accomplish this, I create and upload the following files:
- Print version for Amazon (using Kindle Create, their proprietary tool)
- Print version for Ingram (as PDF)
- Cover formatted for Amazon
- Cover formatted for Ingram
- eBook for Amazon Kindle (also Kindle Create)
- Cover formatted for Kindle
- MS-Word version for Smashwords
- Cover formatted for Smashwords
- Audiobook version for Audible and Findaway Voices
- Cover formatted for Audible
- Cover formatted for Findaway Voices
Each of these parts requires some technical expertise and time on my behalf. That’s time not spent writing (and editing) the book itself. I use a word processor, Amazon’s Kindle Create, an image editor (GIMP – which is like Photoshop), and an audio editor (Audacity). I am a true polymath!
Actual Revenue by Channel
Spinning up different versions of the book must mean I make extra moola – right? Not. Let’s look at my 1099-misc reports for an objective view of who pays me royalties.
My data science friends abhor pie charts, but they are easy to understand and usually colorful. In this case, you can see the breakdown of where the money comes from.
Amazon is a clear winner at 45%. That includes print and ebook – although it’s mostly ebook. If you toss in Audible (owned by Amazon) that amounts to 59% of all my royalties.
Smashwords – which only produces ebooks – supplies another 21% of my author income. Spotify (audiobook) accounts for 20%.
Another way to slice this pie is to think of format. eBooks (Amazon + Smashwords) account for 66% of my income. Audiobooks (Audible + Spotify) account for 34% of my income. Print books account for almost nothing.
Notice Google Play isn’t on that list. Did you know you can buy books from Google? No? Apparently neither does anyone else.
Other Places to Buy
There are other oddballs in the book business…
AbeBooks allows independent bookstores to post their inventory online. AbeBooks is owned by Amazon.
Bookshop sends a percentage of book sales to traditional bookshops. Books sold through Bookshop come from Ingram. Independent book sellers love this option. But to be honest, they’d rather you come in on foot.
Ingram is Special
Speaking of bookstores; if you, as an author, want your book to appear in a physical bookstore (you do!) then you must have a version available through Ingram. Bookstores will not buy books from Amazon; they are competitors, and Amazon does not allow returns. Trust me, it is a hard NO. You must dance with Ingram.
And so…
Forget all of this. Just buy the book. I will thank you no matter what you do. Of course, if you want me to autograph the book (which raises the resale value) then you’ll need a paper copy. Possibly purchased from Ingram where I make the most $$$.
Thank you!
- A la carte – In the retail channel, a customer purchases a license to the title in a traditional a-la-carte purchase environment. In the Library Channel, a school or library purchases a license to the title that may be circulated to one (1) patron at a time. ↩︎
- Credit-based subscription – Customers pay a flat monthly price to the subscription service for credits allocating them a fixed number of audiobooks per month. A sale occurs each time a customer uses a credit to access an audiobook. ↩︎
- Pool subscription – Customers pay a flat monthly price to access a subscription service which contributes to a shared revenue pool. Royalties paid based on Publisher’s pro-rata share of total audiobook listening for each monthly period. There is no set “rate” and payouts in this model will likely vary from month-to-month based on the size of the overall pool and the amount of listening attributed to your audiobook(s). ↩︎
- Combined Portions Model – Combines portions of an audiobook consumed to determine sales of Audiobook Titles. Combined Portions Model (CPM) pays publishers off of SRP after 5 portions of a title have been consumed by subscription end users. A “portion” equals one-fifth of an Audiobook Title. A unit purchase will be recorded for every 5 portions consumed of an Audiobook title, across any number of Users. ↩︎
- Cost Per Checkout – For Audiobook sales that permit Library patrons to borrow access to a digital audiobook for a specific period of time that is automatically terminated upon expiration of the lending period or return of the digital audiobook. Allows for unlimited circulation of licensed copies with access being limited to one (1) patron per borrowed copy. Refer to your distribution agreement for specific pricing details. ↩︎